Exports Transit Procedure

I. Payment arrangements.

Under the Foreign Exchange (Control) Act and Rules, exports are permitted only against advance payment or documentary credit (L/C) to ensure that the payment for the goods is received in Nepal. Therefore, Nepalese Customs releases export shipments only after verifying the bank certificate of advance payment or L/C copy certified by a commercial bank. The exporter has to declare in form BBN I at the time of export that the export earnings will be repatriated within six months in case of transactions under L/C. If payment is not received within 6 months or such extended time as authorized by NRB, the commercial bank has to inform NRB for inquiry into the matter.

There is no limit on advance payment but the buyer has to remit the foreign exchange through a bank or has to exchange foreign currency with a bank while visiting Nepal. The bank issues a certificate of advance payment in a specified format (Annex 16) to the seller or exporter as nominated by the foreign buyer at the time of exchanging the currency. This certificate has to be produced to the Customs at the time of export. However, foreign nationals can carry out as accompanied or unaccompanied baggage Nepalese products up to a value of US $ 1000 without producing foreign exchange certificate of a bank.

When using the other payment method, the L/C specifies the terms and conditions for shipment. After the L/C is received from its correspondent bank, the bank sends a copy to the exporter. It is the responsibility of commercial banks to see that L/C terms and conditions are fully met before accepting shipment documents and releasing payments to an exporter. Nepalese exporters prefer the irrevocable L/C, as it is normally withdrawn only when the exporter does not meet the terms and conditions of shipment leading to the rejection of documents for negotiation by the bank. Therefore, this type of L/C ensures safety of payment to the exporter. Currently banks at the both ends normally mention in most L/C documents that the credit is subject to the UCP 500 (1993).

The commercial banks experience on average 4 shipments out of 1000 that exceed the shipment date specified by the L/C, and most of the documents are subject to discrepancies. Therefore, it has become a normal practice to accept such documents on exporter's risk for negotiation with the correspondent bank. Depending upon the credit status of an exporter, the bank may or may not release payment to the exporter against discrepant documents before confirmation of acceptance of such documents from the correspondent bank. If the payment received from the correspondent bank is not more than USD 500 less than the stipulated L/C amount, the bank can accept the payment with information to NRB. But if the discrepancy in payment is more than USD 500, the bank has to obtain prior permission of NRB to accept the payment. Partial shipment and part payments are allowable only as per the terms of L/C. While releasing payment to the exporter before realizing payments from the correspondent bank, the bank deducts some amount as interest. The interest rate may vary from bank to bank. For instance, one of the commercial banks is charging 12 days interest at 14%. Another commercial bank levies 15 days interest at 12% assuming that the payment will be received within 14-15 days. Most exports are on FOB Kathmandu Airport or Calcutta although a separate payment for freight is allowed subject to the submission of documentary evidence including quotation for freight rates.

II. Certificates for exports.

As the export of specific products like readymade garments takes place regularly in sizable lots requiring timely delivery, uniform quality and tailoring, overseas buyers tend to either permanently station their own staff in Nepal or send experts from India to inspect quality whenever shipments are ready for export. The L/C specifically provides for the production of quality certificate from a nominated agency/person in garment exports.

Certificate of Origin. There are two private sector associations called Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Nepal Chambers of Commerce (NCC) which issue Certificate of Origin (COO) required by Nepalese Customs on all exports.

FNCCI- A seven-copy set of COO (Annex 17) is printed and issued at a cost of NPR 5 per set. Then a charge of 12 paisa per NPR 100 (0.12%) of FOB invoice value is levied at the time of putting stamp and signature on COO when it is filled by an exporter. An exporter needs to apply with an invoice and sometimes L/C copy to verify the value of goods by the concerned district chamber of commerce to obtain the COO.

FNCCI does not itself issue COO but arranges its printing in the name of the each district chamber by allocating a separate code number on the COO. FNCCI has delegated its authority of issuing COO to the following district Chamber of Commerce offices, which are its members:

Nepal Chamber of Commerce, Kantipath, Kathmandu.

Lalitpur Chamber of Commerce and Industry, Lalitpur.

Birgunj Chamber of Commerce and Industry, Parsa.

Bhaktapur Chamber of Commerce and Industry, Bhaktapur.

Morang Merchants' Association, Morang.

Makwanpur Chamber of Commerce and Industry, Makwanpur.

Pokhara Chamber of Commerce and Industry, Kaski.

Siddharthanagar Chamber of Commerce and Industry, Rupandehi

Morang Chamber of Industries, Morang.

Butwal Chamber of Commerce and Industry, Butwal.

Janakpur Chamber of Commerce and Industry, Janakpur.

Narayangarh Chamber of Commerce and Industry, Chitwan.

Nepalgunj Chamber of Commerce and Industry, Bankey.

Kailali Chamber of Commerce and Industry, Dhangarhi.

Gorkha Chamber of Commerce and Industry, Gorkha.

Nawalparasi Chamber of Commerce and Industry, Nawalparasi.

Krishnanagar Chamber of Commerce and Industry. Kapilbastu.

FNCCI also arranges issuance of COO for exports to SAPTA (SAARC Preferential Trading Arrangement) member countries under the similar arrangements for certification and charges. The format as specified by the SAPTA agreement is very similar to GSP Form A. The colour of COO used for export to SAPTA countries is different from that used for overseas exports.

Under the terms of the bilateral Treaty of Trade signed between Nepal and India on December 1996, the export of Nepalese manufactured products is given duty free preferential market access in India. Such product must be manufactured in Nepal and accompanied with a certificate of origin issued by authorized district chambers of FNCCI in the format prescribed by the Treaty. A technical committee headed by the Director General of Department of Industry and consisting of public and private sectors representatives examines in detail the application form and supporting documents submitted by an exporter of manufactured products to confirm the manufacturing process of the product intended for export to India. Examination is usually made of a new product for exporting first time to India. For export of products other than manufactured goods under the preferential market access this prescribed format of COO is not required.

62. NCC-NCC has also been issuing its own COO (Annex 18) for a long time in Kathmandu. An exporter is required to submit following documents to obtain COO from NCC:

Invoice,

Payment Certificate (L/C or advance payment),

Archeological and valuation certificates for handicrafts,

Other certificates like phytosanitary, royalty payment for herbs etc where applicable.

NCC takes a charge of NPR 4 per set at the time of issuing and 12-paisa (0.12 %) per NPR 100 of invoice value at the time of certifying the COO. If FOB value is declared, then the charge will be based on FOB value.

NCC also issues COO for exports to India for preferential market access as per the format prescribed by the Treaty of Trade with India. It is issued against a charge of NPR 3 per set. Then for certification a fixed rate of NPR 11 per consignment is charged from the exporter.

NCC has also been operating a separate branch office at Sinamangal near the Tribhuvan International Airport to issue COO for third country exports for the last two years.

Issuance of Generalized System of Preferences Form A (GSP). An exporter has to fill in a separate standard document called as GSP Form A for stamping and certifying by the Nepalese Customs at the time of export provided the product is eligible for the tariff preference under the GSP scheme of the destined preference giving country. GSP Form A is printed in a special format and colour approved by UNCTAD for acceptance by preference giving countries. The original GSP Form A (Annex 19) is stamped and certified by the Customs at the time of export. On the strength of this certified original GSP the overseas buyer obtains tariff reduction facility while releasing goods from the Customs in the importing country. GSP Form in Nepal is distributed by two agencies.

A carpet exporter first has to request the Trade and Export Promotion Center (TEPC) for the issuance of GSP. Then a three-member team consisting of representatives from the Ministry of Commerce, Central Carpet Industries Association and TEPC makes field inspection at the applicant's production site to verify whether carpets intended for exports are produced locally. On the recommendation of the team TEPC issues GSP Form A to the exporter who submits an application form with a copy of advance payment certificate or L/C copy. TEPC issues GSP form for the export of Nepalese handknotted woollen carpets at a cost of NPR 2 per square meter.

For export of other products, Trade and Export Promotion Centre (TEPC) issues the GSP Form A to exporters who apply in a covering letter enclosing copies of certificates of enterprise registration and income tax registration. The charge for each four copies GSP set Form is NPR 15.

Letter of recommendation for export visa for readymade garments. Nepal government has constituted a Readymade Garments Export Promotion Committee under the chairmanship of Commerce Secretary and represented by various public and private sector organizations to frame visa issue procedures including documentation and inspection. In this respect Garment Association-Nepal (GAN) provides various services as explained in paragraphs 70-75 below.

The European Union allows, under the GSP rules of origin, tariff preference on readymade garments manufactured in Nepal from woven fabrics or yarn originating in an ASEAN member country (except Myanmar), SAARC or Lome Convention country, and imported into Nepal for manufacturing garments. As per the recent protocal concluded between Nepal government and European Union, a new system is introduced since I March, 2000. According to it, for exporting textiles products of five categories - (a) Knitted Shirts, (b) Knitted Pullovers (T-Shirts), (c) Men's or Boys Woven Breeches, Shorts, (d) Women's or Girl's Blouses, Shirts and Shirt Blouses, (e) Women's or Girl's Dress, exporters need to obtain export license from the Department of Commerce. Separate type of Certificate of Origin is also being issued from Chamber of Commerce, (Annex-ISA). The EU has fixed a quota for different types of garments to be imported from Nepal. This quota is applicable only for the purpose of tariff preference under GSP Scheme in the EU market. For exporting to EU market, exporters need to apply to GAN in a covering letter by enclosing the following documents:

Invoice,

Documents to prove manufacture in Nepal, i.e. customs import declaration to verify the import of fabrics, or documents issued by the Cottage and Handicraft Emporium showing locally manufactured fabrics,

COO issued in the country from where the fabrics were imported,

L/C copy,

Packing list (required normally for large quantity exports.

After receiving the application, an inspection team of GAN is sent to the applicant's factory to verify the garment production. Thereafter, GAN issues a letter of recommendation to the concerned Customs staling that the garments in question are produced from the fabrics imported from abroad or manufactured locally, and requesting issue of a GSP certificate. On the strength of this recommendation letter the Customs makes endorsement by putting' its stamp and signature on GSP Form A at the time of export.

For export to the USA and Canada where quota has been fixed for specific categories of garments, GAN is required to issue a recommendation letter (Annex 20) to the Readymade Garments Visa Cell (RGVC) of National Productivity and Economic Development Centre Limited (NPEDC). RGVC is located at the same premises of GAN at New Baneswor, Kathmandu.

A Visa is required on all readymade garments exported to the USA whether a quota has been fixed or not except for garments made of 100 percent silk or woollen garments. The visa, which is also called 'Special Customs Invoice', is issued by the RGVC in the format approved by the US Government.

Exporters intending to export garments under quota to Canada or the USA need to apply to GAN with the following documents:

Application in specified format,

Invoice,

Documents to prove manufacturing in Nepal, i.e. customs import declaration to verify the import of fabrics, or documents issued by the Cottage and Handicraft Emporium showing locally manufactured fabrics,

Copy of certification by the concerned customs along with swatches, i.e. sample piece of fabrics imported for use in the production of garment intended for exports,

L/C copy,

Customs export declaration for previous exports,

A copy of fabrics consumption form which is prepared for submission to the Customs.

On receiving the documents, GAN may send a team to inspect the factory of the applicant, but the factory may not be inspected depending upon the credit status of the applicant, in which case the recommendation letter states that inspection is not required. Then a letter of recommendation is issued in a printed or computerized format in the name of RGVC and handed over to the applicant. However, such inspection is not required for the issue of a Visa for exporting to Canada. GAN levies following charges for issuing recommendation letters to the Customs for certifying GSP Form A on garment exports to EU and to RGVC for issuing Visa on garment exports to the USA and Canada:

20 paisa per piece- for all type of tailored garments exported on piece basis

10 paisa per piece- for knitted garments,

20 paisa per kg - for all garments exported on weight basis.

For the USA categories numbers 363 (Cotton Terry Towel) and 369-S (Cotton Shop Towel) as well as for non-quota category number 369-0 (other types of cotton towel like dust towel), there is an another agency called Nepal Cotton Towel Exporter Association (NCTEA) that issues a recommendation letter (Annex 21) to the RGVC by following almost the same procedures and documentation as applied by GAN. An exporter needs to apply to NCTEA with the following documents:

Customs declarations showing previous export, required for second time exporter,

L/C,

Invoice.

After verification of the documents, NCTEA issues a letter of recommendation to RGVC for the issuance of a visa to the applicant against a fee of 20 paisa per kg. Of the two copies of the recommendation letter, one copy is handed over to the applicant for submission to RGVC and one copy is kept for official record. If an applicant requests a recommendation letter for more than the stipulated quantity, NCTEA inspects the applicant's industry to verify the production capacity and the stock of garments ready for shipment before issuing the letter. In the case of new applicants also NCTEA issues recommendation letter only after inspecting their production sites. The garment and towel manufacturers are required to use temporarily admitted or locally produced fabrics/yarn.

Issuance of visa for export of readymade garments. Exporters of garments and towel to the USA and Canada apply for visa to RGVC of NPEDC with the following documents:

Application in a specified format,

Letter of recommendation of GAN or NCTEA,

Invoice copy,

L/C copy,

Copy of the customs export declaration as evidence of previous shipments,

Certificate of inspection, if GAN or NCTEA has inspected the factory.

After the documents are verified, RGVC issues four copies of visa form (Annex 22) certified with a visa number stamp and authorized signature. The form is entitled Special Customs Invoice. The four copies of the set are used as follows;

White copy to the exporter for transmission to the buyer,

White copy retained for RGVC records,

Yellow copy to the exporter for surrendering to Customs,

Blue copy to the exporter for records.

For the issuance of visa, RGVC makes a charge of 0.2% of the invoice value on all garment exports to the USA and Canada. Overseas buyers require the original visa for releasing the consignments from their Customs; it is not endorsed by Nepal Customs.; The visa remains valid for only five days, and the exporter must ship consignments within that time.

Additional documents for the export of readymade garments. For the export of garments to the US market the documents described in paragraphs 81-84 are also prepared by the exporter.

Special Customs Invoice (SCI). A visa is itself an SCI, but some American buyers continue to demand a separate SCI in addition to a visa. It does not have to be certified.

Multiple country declaration (MCD). MCD (Annex 23) is a requirement of the US Customs and without it the garment consignment is not permitted entry into the USA. The main purpose of this document is reportedly to verify the value addition and manufacturing process in Nepal as a precautionary measure against possible transhipment of garments of another country of origin.

Beneficiary statement (BS). This extra document is prepared only at the request of the buyer. BS is simply a statement off actual details on the shipment of cargo and transmission of documents as specified by L/C.

Quota charge statement (QCS). QCS is an extra document prepared only at the request of the buyer and contains a declaration as to the inclusion of all manufacturing charges in the FOB price.

Valuation certificates for handicraft products. Nepalese Customs assesses customs export valuation of different handicraft products on the basis of recommendations of the Handicraft Association of Nepal (HAN). The documentary requirements are described below in paragraphs 86-89.

Valuation certificate for handicrafts. Handicraft exporters take export samples and five invoice copies to HAN. Except for the suspicious and doubtful cases for which all export quantity are brought to HAN for detailed examination, an authorized official of HAN puts stamp and signature on all copies of the invoice and writes a letter of recommendation (Annex 24) addressing the concerned Customs mentioning the certified total value of the particular consignment. HAN makes a fixed charge of NPR 50 up to the export value of NPR 10,000 and NPR 100 for more than NPR 10,000 value.

Certification for handicrafts produced from domestic animal none, leather and horn. For the export of handicrafts like buttons, tie-pins and other articles produced from bone, leather and horn of domestic animals, HAN examines samples brought to it by an exporter and certifies the invoice by issuing a no-objection letter (Annex 25) certifying that the goods are made from domestic animals. The fee charged for this purpose is NPR 20 up to the value of NPR 4,000 as minimum charge and then 0.5 percent of invoice for any excess value.

Valuation certificate for silver handicrafts. Under the regulations of NRB, a minimum value addition of 3 5 percent to the market value based on the international price of silver is required for exporting silver based handicraft products like jewelry, decorative articles and utensils. NRB sends a copy of international price list transmitted periodically to the Department of Mint. After checking the value addition in the invoice value, GAN puts its stamp and signature on the back of the invoice, which is made in seven copies as per the approved format of NRB. A letter of value recommendation is also issued. HAN makes a fixed charge of NPR 50 up to the export value of NPR 10,000 and NPR 100 for more than NPR 10,000 value.

Certification for gold handicrafts. For the export of gold handicrafts a valuation certificate is not required. Under the NRB regulations, only the Customs is required to check the minimum value addition of 10 percent in the invoice value for permitting exports. As in silver handicrafts, the invoice has to be made for exporting gold handicrafts in the approved format of NRB for checking by the Customs. The main function of HAN is to issue a Passbook to an applicant-exporter by charging NPR 700 to HAN members and NPR 1,000 to others. The Passbook is to be produced to the Customs at the time of export. The Passbook contains detail entries made by NRB at the time of selling gold to the exporter who is required to submit all export documents as an evidence of utilization of gold purchased previously. Export of silver and gold based handicraft products are at present shipped only through Tribhuvan International Airport and Foreign Post Office, both located at Kathmandu.

Archeological Certificates. The export products of archeological importance and artistic values, which generally include idols, curios and thanka paintings of more than 100 years old is prohibited. Only ordinary products do not require such examination by the Department of Archeology (DOA). Exporters intending to sell such items need to fill in an application form giving detailed particulars about the size, weight, quantity and making date, and then submit to DOA by affixing a postage stamp of NPR 5. The application form is available in the printed format at DOA office. Then the exporter is also required to affix postage stamp of NPR 3 on the second copy of a certificate, which is also printed in an approved format of DOA. The total cost for completing the examination by DOA is thus NPR 8. On the basis of the application details, experts at DOA examine each and every item depending upon the nature of the product. The DOA staff put a lac seal on each and, if the pieces are small, put a joint seal on the mouth of the plastic/paper bag containing a number of pieces. Then it issues a certificate in two copies giving details of the products examined by them. Out of the two copy certificate (Annex 26) the original is handed to the exporter and the second copy containing the postage stamp of NPR 3 is retained at DOA office for record purposes.

Certification for exports of plants and forest products. Approval has to be obtained from the concerned department for the export of plant and forest products, which are not prohibited for export in raw or unprocessed form.

First, a release letter has to be obtained from the District Forest Office (DFO). An application containing details on the type of herbs to be collected, collection area, expected collection quantity and purpose (export or domestic-'uses) is to be submitted to the DFO located in all districts except Mustang. The DFO issues a written permission letter (Annex 27) to the applicant. After collecting, storing and weighing, stipulated quantity of the herb on the strength of this letter, the exporter has to approach the DFO, which, after any necessary examination, charges the stipulated royalty payment and issues a release letter (Annex 28). The release letter as a proof of royalty payment allows domestic transportation and uses of the herb. In addition, if the product is intended for export, the exporter also has to apply to the DFO for a recommendation letter to the concerned Customs. All the procedures along with the royalty rate are prescribed in the Forest Rules 2051 BS (1995).

For the export of extracts and by-products of plants and herbs, permission from the Department of Plant Resources (DOPR) has to be obtained. DOPR has prescribed a format of application (Annex 29) for submission by an exporter in two copies by affixing NPR 5 postage stamps. For forest based products like herbs the release letter of DFO also is to be submitted. After receiving an application, DOPR deputes its staff, if necessary for large lots, to the manufacturing/storage sites to draw samples from each box/container. These samples are tested in the lab of DOPR and if found satisfactory all boxes/containers are sealed. Thereafter, DOPR issues a recommendation letter (Annex 30) to the concerned Customs to allow exports of the consignment. DOPR also issues permit letter to export waste and by-products after verifying whether such products can be farther processed or put for better utilization inside the country. DOPR levies a fixed charge of NPR 150 per sample for lab test.

Most countries permit imports of plants and plant products only on the basis of a Phytosanitary Certificate (PC). Nepal's Plant Protection Act 1972 and Plant Protection Rules 1975 have made it mandatory to obtain PC for exporting plants and plant products. An exporter has to submit an application (Annex 31) to Plant Quarantine Section (PQS) of Department of Agriculture along with supporting documents like income tax certificate, enterprise registration certificate, copy of customer's order, and, if products are forest based, a release letter of DFO. PQS has made arrangements to send its staff to the production site if it is necessary for examination of plants and plant products. If plants are found in healthy conditions, PC (Annex 32) is issued by PQS. This service is also available from the seven plant quarantine offices located at the Customs Posts of Kakarvita, Biratnagar, Jaleshwar, Birgunj, Bhairahwa, Nepalgunj and Tribhuvan International Airport. No charge is levied for the issue of PC on export.

III. Clearance at Nepalese Customs.

An exporter or CA has to submit the following documents to the Nepalese Border Customs:

Clearance certificate of Department of Archeology for certain handicrafts,

Clearance certificate of Department of Plant Resources for forest and plant based products,

Phytosanitary certificate of PQS, Department of Agriculture for plants,

Clearance certificate of Department of Drug Management for medicines,

Clearance certificate of Department of Mines and Geology for mineral products.

After the consignment is checked and verified with related documents, the Nepalese customs officer endorses the CTD (Annex 33).

After the payment of customs charges, CA is given clearance to export and move the cargo to the Indian border. If a container was booked with prior arrangement with a shipping line, the cargo is loaded into the container at the customs premises. Containers are also brought to Kathmandu and other factory sites for the loading of export consignments, but the goods are subject to customs check at the border.

IV. Entry into India.

The exporter or CA approaches the corresponding Indian Border Customs with the cargo and submits the following documents:

CTD duly endorsed by the Nepal Customs,

Invoice-original,

Packing list-original,

Certified copy of L/C or Certificate of advance payment,

Certificate of origin-original,

Duty insurance or legally binding undertaking in the name of the concerned Commissioner of Customs,

Authority letter of CA.

In the 1999 Treaty of Transit it has been stated that no additional documents other than invoice, packing list and certified copy of L/C will be asked for by the Indian Customs except when considered necessary for the clearance of any specific goods.

The Indian Border Customs check OTL of containerized cargo and, if found intact, allow onward transportation without physical examination of cargo unless there are valid reasons to do otherwise. If OTL is found broken or defective, the goods are checked to see that they are in accordance with CTD. Then a fresh OTL is put on the container with its serial number endorsed on CTD before allowing onward transportation to the seaport of exit. The Indian Border Customs make a selective examination of non-containerized goods to check that they are as per the CTD. As with imports, specified sensitive goods must be transported in closed railway wagons or pilfer-proof containers, which can be securely locked. Containers or wagons are locked and duly sealed after examination by the Customs.

After examining the cargo, documents and seals, the Indian Border Customs endorses all four copies of CTD and hands the original to the CA, and retains the fourth copy for its record. The duplicate and triplicate copies are to be sent by post to the Calcutta Customs, but to avoid delay in postal transmissions, they are handed to the CA in a sealed envelope. However, this facility will not be allowed for any exporter who defaults in the timely production of these documents

Duty Insurance. As with import cargo, duty insurance for export cargo is required only for specified sensitive goods, and a legally binding undertaking is required for other goods.

CA sends documents including the original CTD and seal cover generally with the driver of the vehicle carrying the cargo or by courier service or send a personal carrier for delivering to the authorized agent in Calcutta. Normally it takes two to four days for containers to reach Calcutta port.

V. Procedures at the port of exit.

When documents reach Calcutta, CA files documents at the Customs House. The Customs House compares the original CTD with the duplicate and triplicate copies received separately in a sealed envelope from CA. Documents are cleared permitting exports by Calcutta Customs normally within 24 hours of filing. After documents are cleared by the Calcutta Customs, CPT approval is obtained for taking the cargo inside the port. At the same time booking of container with a shipping line is also confirmed. The export cargo is then taken inside the port where the Customs EO or PO checks seals and locks on the wagons or containers and packages, and compares with the declaration made on CTD.

If seals and locks are found intact, EO endorses all copies of CTD. In cases where seals and locks are not intact or there is otherwise suspicion, the goods are checked on percentage basis to ensure that they correspond with the information on CTD before endorsing all copies. Then the cargo is loaded onto a vessel or handed over to the ship's agent inside the port. After necessary endorsements, EO gives back the original, duplicate and triplicate copies of CTD to CA who takes them again to the Calcutta Customs. After the Calcutta Customs makes necessary entries on all copies, the original is handed back to CA for submission to the Border Customs, the triplicate copy is sent to the Border Customs and the duplicate copy retained for records.